Summer Internship Report

On

ASSESSMENT OF INSURANCE POLICIES AND PROCEDURES OF VARDHMAN

SPINNING AND GEN. MILLS

By
SHANKY SINGLA
A0101909386
MBA Class of 2011

Under the Supervision of

MS. L.K.DHILLON
Professor
Department of FINANCE

In Partial Fulfillment of Award of Master of Business Administration

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH
SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
2010

1
 AMITY UNIVERSITY UTTAR PRADESH
AMITY BUSINESS SCHOOL

DECLARATION

I, Shanky Singla student of Masters of Business Administration from Amity Business School, Amity
University Uttar Pradesh hereby declare that I have completed Summer Internship on “

ASSESSMENT OF INSURANCE POLICIES AND PROCEDURES OF VARDHMAN

SPINNING AND GEN. MILLS
” as part of the course requirement.

I further declare that the information presented in this project is true and original to the best of my
knowledge.

Date: 28/06/10 Shanky Singla

Enroll. No: A0101909386

Place: Noida

MB
A Class of 2011

2
3
 AMITY UNIVERSITY UTTAR PRADESH
AMITY BUSINESS SCHOOL

CERTIFICATE

I hereby certify that Shanky singla students of Masters of Business Administration at Amity
Business School, Amity University Uttar Pradesh has completed Summer Internship on
“ASSESSMENT OF INSURANCE POLICIES AND PROCEDURES OF VARDHMAN
SPINNING AND GEN. MILLS”, under my guidance.

MS. L.K.DHILLON

(Lecturer/Asst. Prof./Prof.)

Department of Finance

Acknowledgement
4
 This study of ASSESSMENT OF INSURANCE POLICIES AND PROCEDURES OF
VARDHMAN SPINNING AND GEN. MILLS

Could not have been possible by my efforts only. I would like to express my deep
gratitude to those who have accompanied me and gave me the guidelines in various
ways to make the efforts a reality.

I am grateful to my Industry Mentor Mr. O.P.Samkria for the encouragement and

enlightening given by him which has been of immense help towards the successful
completion of the project.

I would also like to express my special thanks to my faculty mentor Ms.L.K.Dhillon

for her timely advice and valuable guidance during the project study.

My heartiest thanks to the library and the other staff of Vardhman for their
cooperation and help throughout my tenure here.

Above all, I would like to express my deep gratitude to my family and friends for
providing me moral support and help

SHANKY SINGLA

Enroll. No: A0101909386

Program: MBA(Gen)2009-11

CONTENTS
5
 Declaration

Certificate from Industry Guide

Certificate from Faculty guide

Acknowledgement

S.No. Chapter Name

1 INTRODUCTION

2 FINANCE

3 RESEARCH METHODOLOGY

4 LITERATURE REVIEW

5 INSURANCE

6 ANALYSIS

7 CONCLUSION AND RECOMMENDATION

1 INTRODUCTION

1.1 Introduction Vardhman

1.2 Mission and vision

1.3 History

1.4 Portfolio

1.5 Holdings

1.6 Achievements
6
 1.7 Products

1.8 Facilities

1.9 Globalisation

1.10 Exporting countries

1.11 Alliances

1.12 Corporate social responsibility

2 FINANCE
2.1 Finance department of finance

2.2 Need for financial planning

3 LITERATURE REVIEW
3.1 Vardhman textiles set up separate thread unit
3.2 Insurance and asset building for the under banked

4 INSURANCE
4.1 Fire insurance

4.2 Machinery insurance

4.3 Marine insurance

4.4 Marine cargo insurance

4.5 Misc. Insurance

4.5.1 Group Mediclaim Insurance

4.5.2 Group Personal Accident

4.5.3 WC Policy

4.5.4 Money Policy

7
 4.5.5 Fidelity Guarantee policy

5 RESEARCH METHODOLOGY

5.1Research Method

5.2Data Collection Methodology

5.3Study Type

6 ANALYSIS

7 CONCLUSION AND RECOMMENDATION

VARDHMAN SPINNING AND GENERAL MILLS

8
1. INTRODUCTION

1.1 Introduction of Vardhman

9
Vardhman Group is a leading textile conglomerate in India having a turnover of $700 mn.
Spanning over 24 manufacturing facilities in five states across India, the Group business
portfolio includes Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic Fibre and
Alloy Steel.

Vardhman Group manufacturing facilities include over 8,00,000 spindles, 65 tons per day
yarn and fibre dyeing, 900 shuttleless looms, 90 mn meters per annum processed fabric, 33
tons per day sewing thread, 18000 metric tons per annum acrylic fibre and 100,000 tons per
annum special and alloy steel.

Vardhman has evolved through history from a small beginning in 1965 into a modern textile
major under the dynamic leadership of its chairman, S.P.Oswal. His vision and insight has
given Vardhman an enviable position in the textile industry. Under his leadership, Vardhman
is efficiently using resources to innovate, diversify, integrate and build its diverse operations
into a dynamic modern enterprise

Mission:

10
 Vardhman aims to be world class textile organization producing diverse
range of products for the global textile market. Vardhman seeks to achieve customer delight
through excellence in manufacturing and customer service based on creative combination of
state-of-the-art technology and human resources. Vardhman is committed to be responsible
corporate citizen.

VISION:

“To be globally recognized as a Leading Supplier of Quality Fabrics”

11
1.3 History

The industrial city of Ludhiana, located in the fertile Malwa region of Central Punjab is
otherwise known as the “Manchester of India”. Within the precincts of this city is located the
Corporate headquarters of the Vardhman Group, a household name in Northern India. The
Vardhman Group, born in 1965, under the entrepreneurship of Late Lala Rattan Chand
Oswal has today blossomed into one of the largest Textile Business houses in India.

At its inception, Vardhman had an installed capacity of 14,000 spindles, today; its capacity
has increased multifold to over 8 lacs spindles. In 1982 the Group entered the sewing thread
market in the country which was a forward integration of the business. Today Vardhman
Threads is the second largest producer of sewing thread in India. In 1990, it undertook yet
another diversification – this time into the weaving business. The grey fabric weaving unit at
Baddi (HP), commissioned in 1990 with a capacity of 20,000 meters per day, has already
made its mark as a quality producer of Grey poplin, sheeting, shirting in the domestic as well
as foreign market. This was followed by entry into fabric processing by setting up Auro
Textiles at Baddi and Vardhman Fabric at Budhni, Madhya Pradesh. Today the group has 900
shuttleless looms and has processing capacity of 90mn meters fabrics/annum.

In the year 1999 the Group has added yet another feather to its cap with the setting up of
Vardhman Acrylics Ltd., Bharuch (Gujarat) which is a joint venture in Acrylic Fibre
production undertaken with Marubeni and Exlan of Japan. The company also has a strong
presence in the markets of Japan, Hong Kong, Korea, UK and EU in addition to the domestic
market. Adherence to systems and a true dedication to quality has resulted in obtaining the
coveted ISO 9002/ ISO 14002 quality award which is the first in Textile industry in India and
yet another laurel to its credit.

12
1.4 Portfolio

The group portfolio includes Yarn, Fabrics, Sewing Thread, Fibre and Alloy Steel.

Business Wise Turnover for the financial Year 2008-09

Actual 2008-09 Group Total( Rs
USD Million % Share
crore )
Yarn 1513 329 47%
Fabric 689 150 22%
Sewing Thread 337 73 11%
Steel 327 71 10%
Power plant 66 14 2%
Fibre 254 55 8%
Total 3186 693 100%

Yarns
Yarn Manufacturing is the major activity of the group accounting for 47 percent of the group
turnover. Vardhman is virtually a supermarket of yarns, producing the widest range of cotton,
13
synthetics and blended, Grey and Dyed yarns and Hand Knitting Yarns, in which Vardhman
is the market leader in India. The group has twenty one production plants with a total
capacity of over 8 lacs spindles, spread all over the country. In many of the yarn market
segments, Vardhman holds the largest market share. Vardhman is also the largest exporters of
yarn from India, exporting yarns worth more than USD 150 million.

Sewing Thread
Vardhman is the second largest producer of sewing thread in the country. The sewing thread
manufacturing capacity is being expanded from 17 tons per day to 33 tons per day in its
sewing thread plants located at Hoshiarpur, Baddi and Ludhiana. Sewing threads contributes
11 percent of the group turnover.

Fabrics
the group has created state-of-the-art fabric weaving and processing facilities in its plant at
Baddi, Northern India. The group has installed 900 shuttle less looms and a fabric processing
capacity of 90 million meters per annum in collaboration of Tokai Senko of Japan. Fabrics
business contributes 22 percent to the group turnover

Fibre
The group has set up an Acrylic Staple Fibre plant at Bharuch in Gujarat in collaboration with
Marubeni and Japan Exlan of Japan. The plant has annual capacity of 18000 tons per annum.
Fibre contributes 8 percent to the total turnover of the group.

14
Steel
The Group is also present in upper-end of the steel industry. The group has manufacturing
capacity of 100000 tons of special and alloy steel. The group supplies its steel products to
some of the most stringent quality steel buyers like Maruti and Telco. It contributes 10
percent to the total turnover of the group.

1.5Holdings

Vardhman Holding Limited

Vardhman Textiles Limited

Vardhman Acrylic Limited

VMT Spinning Company Limited

Vardhman Yarns and Threads Limited

1.6 Achievements

It’s an overwhelming feeling when the efforts and hard work put in are recognized and
felicitated. A feeling that galvanizes the Group into believing in more, in itself and
reaffirming its commitment to offer products that invoke trust and reliability.

Back home, the Vardhman Group became India’s first textile company to be awarded
ICO9002/ ISO 14002 Certification. It is the largest producer and exporter of yarns and Grey
woven fabrics from India. Vardhman is also the largest producer of tyercord yarns and the
second largest producer of sewing threads in India. The Vardhman Group vision of

15
excellence is matched by a dedication and sincerity to be the best and excel in every industry
it has a presence.

Textile Export Promotion Council 2007-08

Special Achievement Award in Yarn Category

Textile Export Promotion Council 2007-08

Silver Top Exporter Award in Yarn Category

Textile Export Promotion Council 2007-08

Bronze Trophy in Processed Yarn Category

Textile Export Promotion Council 2005-06

World Trophy in highest export in Yarn Category

Textile Export Promotion Council 2005-06

Bronze Trophy for Highest Global Export Category (Overall)

Textile Export Promotion Council 2004-05

World Trophy in highest export in Yarn Category

Textile Export Promotion Council 2004-05

Silver Trophy for Highest Global Export Category (Overall)

Textile Export Promotion Council 2003-04

Gold trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 2003-04

Bronze trophy in mill fabric exporter category

Textile Export Promotion Council 2002-03

Gold Trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 1998-99

Silver Trophy

16
Textile Export Promotion Council 1997-98
Bronze Trophy

Textile Export Promotion Council 1996-97

Silver Trophy

Govt. Of India Award 1994-5, 1995-96

Award of Merit

Textile Export Promotion Council 1993-94

(Merchant Export Category for Fabrics)
Bronze Trophy

Textile Export Promotion Council 1993-94

(Merchant Export Category for Fabrics)
Gold Trophy

Textile Export Promotion Council 1990-00

Gold Trophy

17
1.7 Products

Yarns

Yarn is the largest strategic business unit of the Vardhman Group with 8,00,000 spindles and
65 MT tons per day yarn and fiber dying capacity. The Group offers one-stop solution for
variety of yarn requirements of the leading customers in India and the international markets.
Vardhman offers the widest range of specialized greige and dyed yarns (NE 10 to NE 200) in
cotton, polyester, acrylic and varieties of blends. The group offers value added products like

18
Organic Cotton, Melange, Lycra, Ultra yarns (contamination controlled), gassed mercerized,
super fine yarns and fancy yarns for hand knitting. Vardhman is India’s largest exporter of
cotton yarn to the most quality conscious markets like EU, USA and Far Eastern countries

Products

Cotton Yarn Special Blended Yarn

Organic Cotton Yarn Core Spun Yarn
Fair Trade cotton Yarn Melanges
Organic Fair Trade Cotton Yarn Gassed Mercerised
Ellitwist Modal Yarn
Vortex Yarn Tencel Yarn
Slub Yarn Viscose Yarn
Acrylic Yarn Hand Knitting Yarn
Poly –Cotton Yarn Speciality Yarn
Acrylic – Cotton yarn

19
 Fabrics

“VISION : To be globally recognized as a Leading Supplier of Quality Fabrics”

Vardhman is among the few fully integrated fabric suppliers in the country. An exquisite
range of fabrics for shirting and trousers enables Vardhman to offer fashion solutions to the
leading clothing manufactures in the world. The state-of-the-art manufacturing facilities
having 900 shuttleless looms and producing 90 mn meters per annum processed fabric are
located in North and Central India, which cater to the highly customized fabric needs of the
buyers. An integrated fabric supply chain extending from raw materials to yarns and from
weaving to processing provides the winning edge to the customers.

20
Shirting

Count range Ring spun Ne 20’s to 80’s Ring spun Blends 2/40’s to 2/210’s 100% cotton,
Polyester cotton, Cotton stretch DowXLA, Cotton Tencel, Cotton Modal, Cotton
Bamboo, Cotton silk, Cotton Nylon, Cotton Nylon stretch, Cotton Linen.
Weave Yarn Dyed: Chambray, fil-a-fil, checks, stripes, Oxford, HBT Others (yarn dyed
& piece dyed) Plain, twill, satin, oxford, dobby, herringbone, Pique Cord.
Fabric weight 2-5.6 oz/yd’2
58”
Finished width

Bottom weights

Count range Ring spun Ne 20’s to Ne 2/80’s Open end Ne 6’s to Ne 16’s 100% cotton,
Polyester cotton, Cotton stretch DowXLA, Cotton Tencel, Cotton Modal, Cotton
Bamboo, Cotton silk, Cotton Nylon, Cotton Nylon stretch, Cotton Linen
Coolmax.
Weave Chambray, fil-a-fil, checks, stripes, Oxford, HBT Others (yarn dyed & piece
dyed) Plain, twill, Drill, satin, oxford, dobby, herringbone, Pique Cord, Honey
comb
Fabric weight 6.00 to 12.00 Oz.yd’2
Finished width 58” to 60

Finishes Soft, Peach, Mechanical stretch, Microsand, Easy to iron, Water resistant, Stain
Release, Stiff finish, Airo finish, Carbon finish, Diamond finish, Airo enzyme,
Soft Easy Care, Soil resistant, Thirsty finish, Feather touch, Banana Peel and to
add Ammonia finish.
Eco-Friendly
Bamboo, Organic Cotton, Linen
Blends
FLO, OEKOTEX, SKAL.
Also certified by

21
THREADS

Vardhman is a leading player in the Indian sewing thread market. The joint venture with
A&E Threads of USA offers complete thread solutions from tailoring to industrial
applications. With 33 tons per day capacity spread over three plants located in North and
South India, Vardhman is uniquely positioned to serve the garment manufacturers across the
world. Vardhman’s customer value proposition includes threads made from cotton, polyester,
core spun, nylon and filaments, which are AZO free and meet OEKO Tex Standards.

22
FIBER

The acrylic fiber of Vardhman is acclaimed for a wide variety of textile applications. The
modern manufacturing plant based on renowned Japan Exlan Wet Spun technology produces
18000 MT per annum acrylic fiber at Gujarat (Western India). The fiber marketed under the
brand name VARLAN has achieved high level of recognition in the Indian market because of
super soft touch and silky appearance.

Product Features
Superb soft touch & silky appearance; resilence; excellent dye –ability; brilliant shades, high
bulk yarn products incorporating shrinkable fibres; low pill formation; better crease recovery;
high resistance to chemicals, light, weathering and midew make VARLAN a preferred fibre
in knitted, woven and other applications.

23
Product Range

Acrylic Bright & Semi-dull Non shrinkable fibre in 1.2, 1.5,2,3, 5, 7, 10, 15 deniers in a
wide range of cut 24engths.

Acrylic Bright & Semi-dull Shrinkable fibre with different shrinkage levels in 2,3,5 deniers
in a wide range of cut lengths

Acrylic Tow endless Bright & Semi dull in 2, 3 denier.

Specialty acrylic fibres suitable for Open end spinning; Soft handle, Water absorbent
applications etc.

Vardhman Acrylics Ltd

Vardhman Group ventured into the manufacture of Acrylic Fiber/Tow in 1999. The joint
venture, Vardhman Acrylics Ltd. (VAL) was set up together with two leading Japanese
business houses namely Japan Exlan Co. Ltd., a part of Toyobo Group of Japan and
Marubeni Corporation Japan. The company has set up an 18000 TPA Acrylic Staple Fibre
and Tow production plant at Jhagadia, Distt. Bharuch in the state of Gujarat, India. The world
class wet spun technology for the manufacture of Acrylic fiber / Tow has been sourced from
Japan Exlan Co. Ltd., Japan. It is a state of the art, highly automated production facility
making it amongst the most advanced plants of its’ type in the world. VAL’s products are
marketed under the brand name “VARLAN®”.

24
STEEL

Vardhman Special Steel is a niche player in the special and alloy steel market of India. With
installed capacity of 1, 00,000 MT per annum, Vardhman offers alloy steel made with
contemporary technologies like electro-magnetic stirrers, vacuum degasification, auto mould
level controlled and auto controlled cooling etc. With continuous research and development
efforts, Vardhman Special Steel meets the stringent quality requirements of commercial
vehicles, tractors, cars, two wheelers, defence applications, railway components and other
engineering products.

Engineered for the future

Vardhman Special Steels incorporates some of the most advanced manufacturing facilities
with equally reliable support facilities. The plant has well conceived layout plan with modern
material handling facilities-all designed for economic processing of materials and human
skills. Vardhman’s ability to adopt changes in technology is evident in its extensive use of
automation and contemporary concepts

1.8 FACILITIES

Yarn Manufacturing Units Location Spindles

Vardhman Spinning and General Mills Ludhiana (Punjab) 64572

25
 Baddi (Himachal
Vardhman Spinning Mills 36288
Pradesh)
Baddi (Himachal
Auro Spinning Mills 77792
Pradesh)
Baddi (Himachal
Arisht Spinning Mills 82128
Pradesh)
Baddi (Himachal
VMT Spinning Company Limited 45120
Pradesh)
Arihant Spinning Mills Malerkotla (Punjab) 113804
Mandideep (Madhya
Anant Spinning Mills 74496
Pradesh)
Satlapur (Madhya
Vardhman yarns 170528
Pradesh)
Bhudhni(Madhya
Vardhman Fabrics (Yarns Division) 60000
Pradesh)
Vardhman Yarns and Threads Ltd.
Hoshiarpur (Punjab) 60352
Spinning
Spinning-Total 785080
Rotors
Baddi (Himachal
Auro Spinning 1248
Pradesh)
Bhudhni(Madhya
Vardhman Fabrics 2160
Pradesh)
3408
Total

Yarn & Fibre Dyeing Units Location Production Capacity

Vardhman Spinning and General Mills,
Ludhiana (Punjab) 20 Tonnes per day
Dye House
Baddi (Himachal
Auro Dyeing 35 Tonnes per day
Pradesh)
Fibre Dyeing 15 Tonnes per day
Yarn Dyeing 20 Tonnes per day
Mahavir Mercerizing Unit Hoshiarpur (Punjab) 15 Tonnes per day
Total 65 Tonnes per day

Fabric – Weaving Units Location Production Capacity

Baddi (Himachal
Auro Weaving Mills 264 looms
Pradesh)
Baddi (Himachal
Mahavir Spinning Mills 236 looms
Pradesh)
26
 Bhudhni(Madhya
Vardhman Fabrics 400 looms
Pradesh)
Total 900 looms

Fabric Processing Units ( Finished

Location Production Capacity
Fabric)
Baddi (Himachal 50 million meters per
Auro Textile
Pradesh) anuum
Bhudhni(Madhya 40 million meters per
Vardhman Fabrics
Pradesh) anuum
90 million meters per
Total
anuum

Sewing Thread Business Location Production Capacity

Vardhman Yarns and Threads Limited
Hoshiarpur (Punjab) 21 MT per day
(Unit –I)
Vardhman Yarns and Threads Limited
Ludhiana (Punjab) 7 MT per day
(Unit –II)
Vardhman Yarns and Threads Limited
Perundrai (Tamil Nadu) 3 MT per day
(Unit –III)
Vardhman Yarns and Threads Limited Baddi (Himachal
2 MT per day
(Unit –IV) Pradesh)
Total 33 MT per day

Steel Business Location Production Capacity

100000 MT per
Steel Unit-Vardhman Special Steels Ludhiana (Punjab)
annum

Acrylic Business Location Production Capacity

Fibre Manufacturing Unit-Vardhman 18000 MT per
Jhagaria (Gujarat)
Acrylic Ltd. annum

1.9 Globalization

27
•
Vardhman ventured in to the global market in 1986 with an export value of one core to
reach exports of $150 mn in FY 2008-09.
• Little wonder then, that Vardhman, today, exports 40% of its yarn production to
more than 25 countries and has a strong presence in markets like the EEC, USA,
Canada, China, Japan, Korea, Mexico, Brazil and Mauritius, Middle East.
Vardhman has a share of more than 6% in total Yarn exports from India.

Its trusted, tested and reliable workforce, coupled with the latest technology, quality
consciousness, customer oriented services and strong logistics has given Vardhman an edge
over its competitors and in the world’s most quality conscious and price sensitive markets.
Thereby making Vardhman a truly international organisation in terms of sourcing from and
catering to the world market

28
1.10 We export to the world!

Some of our prominent markets are –

Australia Portugal
South Africa Iran
Tunisia Morocco
Brazil Turkey
Bangladesh Russia
Belgium Saudi Arabia
China Singapore
Canada Sri Lanka
Colombia Spain
Egypt Switzerland
Germany Syria
Greece Thailand
Hongkong U.K.
Indonesia Ukraine
Israel Uruguay
Italy USA
Japan Venezuela
Korea Vietnam
Lebanon New Zealand
Malaysia Mauritius

29
1.11 ALLIANCES

Vardhman’s International alliances

Garments
Nisshinbo Textiles Inc., Japan

Fabric Dyeing & Finishing

Tokai Senko, Japan

Fiber & Yarn Dyeing

Nihon Sanmo Dyeing Co. Ltd.,
Japan

Gassed Mercerized Yarns

Kiyung Bang South Korea

Cotton Yarn
Toho Rayon, Japan

Sewing Thread
American & Efird Inc., USA

Acrylic Fibre
Marubeni Corp, and Japan Exlan of
Japan

30
4. INSURANCE

1.12 CORPORATE SOCIAL RESPONSIBILITY

• Sri Aurobindo Socio-Economic and Management Research Institute is engaged in

the promotion of education, research and publications highlighting social and
economic issues facing the society. The Institute runs a Human Resource
Development Centre for providing career counselling and guidance to college
students in Punjab. The teams of experts also visit the colleges in the state to prepare
college students for gainful employment in the industry.

• Sprung from a keen desire to set up an educational institution in Ludhiana and

inspired by the writings of Sri Aurobindo and the Mother, the Trust has set up a
college – Sri Aurobindo College of Commerce and Management (affiliated to the
Punjab University) with the mission to create an institution with distinction
dedicated to the ideals of creating disciplined career oriented young people ready for
going for administrative and management roles in enterprises or to set up their own
business as entrepreneurs.

31
4.1 FIRE INSURANCE

Topics
• Indian Insurance Scene

• Company Performance

• History Of Fire Insurance

• Basic Coverage/ Exclusion /Conditions

• Add- On Coverage

• Special Stock Coverage Policies

• Business Interruption Policies

• Summary

FIRE INSURANCE – HISTORY

• Started somewhere in the 14th century

• Developed in to a business in 17th century

• Only fire was the insured peril

• As principles and practice of general insurance got developed, more perils were added to the
fire cover and the policy became a package policy
32
PROPERTY COVERED- STRUCTURAL
• Buildings

• Electrical installations

• Pipelines

• Tanks

• Structures in open

PROPERTY COVERED- CONTENTS

• Plant and machinery

• Furniture fixture fittings

• Stocks- RM/WIP/FG/packaging

• Stocks in open

• Stocks in tanks

33
 • Stocks in warehouses/godowns

BASIC COVER
s.no COVER AND NOT BY/ TO SOLUTION
1. FIRE Own fermentation ADD ON COVER
natural heating
spontaneous
combustion*
Heating or dying
process burning by
authorities
2. LIGHTENING
3. EXPLOSION/IMPLOSION Boilers ETC. Where Boiler explosion policy
steam is generated

Apparatus where Machinery breakdown

centrifugal force is policy
generated
4. AIR CRAFT DAMAGE Pressure wave damages NIL

34
5. RIOT,STRIKE,MD & TD Cessation of work NIL
temporary
dispossession burglary
housebreak, theft,
larcency
6. STORM,FLOOD,INUNDATION
7. IMPACT DAMAGE Vehicles belongings or ADD ON COVER
owned
8. SUBSIDENCE LANDSLIDW Normal crackling, NIL
settlement coastal/river
defective design,
structural alteration

9. BURSTING OF WATER
TANKS/PIPES
10. MISSILE TESTING OPERATION
11. LEAKAGE FROM SPRINKLER Repairs to sprinkler
INSTALLATIONS alterations to building
12. BUSH FIRE Forest fire ADD ON COVER

POLICY CONDITIONS
S.NO EXCLUSION REASON
1. • Misrepresentation Violation of utmost good faith
• Misdiscription
• Non- Disclosure

2. No cover after 7 days from fall or displacement NIL

due to uninsured perils
3. • Alteration of activity • UGF
• Unoccupied property more than 30 days • INSURABLE
• Change of hands other than will/law INTEREST

4. Marine policy coverage

5. • Cancellation of policy by insured • Short period premium
• Cancellation of policy by insurer • 15 days notice
6. Duty of the insured
• Intimation within 15 days
• List of items damaged with value, submit bills,
A/C Books ETC.
LIABILITY OF THE COMPANY
35
 • Not liable if claim is not tenable within 12
months
• Exemptions for pending action or arbitration

7. Duty of the Insurer

• Keep possession of damaged property
• Sell or dispose
8. FRADULENT CLAIMS Violation of utmost good faith
• Policy benefits will be forfeited
9. Claim settlement option to with insurer
10. CONDITION OF AVERAGE
• Every item will bear a rateable preparation if
undersigned
11. CONTRIBUTION CONDITION
• If other policies also cover the same property,
apportionment of loss by all the policies.
12. SUBROGATION RIGHTS
• Rights to obtain relief from other parties to be
given to the company
13. ARBITRATION
• If claim is admissible and quantum is under
dispute, arbitration is carried out
14. Written communication
By insured
15. REUNSTATEMENT OF SUM INSURED
To full value after the loss by pay RI premium,
which is deducted from claim amount

SPECIAL STOCK POLICIES

Floater policy
• No minimum sum insured

• One sum insured for stocks floating in various locations

• Highest rate+ 10% extra

Declaration policy
• Minimum S.I. is Rs. 1 cr.

• No short period policy

• No cover for stock in process

• Monthly declarations

• Premium adjustment after 12 months with minimum retention

36
Floater declaration policy
• Minimum S.I. is Rs. 2 cr.

• No short period policy

• No cover for stock in process

• Monthly declarations for stock floating in various locations

• Premium adjustment after 12 months with minimum retention

4.2 MACHINERY INSURANCE

With the increasing use of various kinds of machinery in different areas of industrial activities or any
other field, the risk of breakdown of Electrical / Mechanical machines is increasing day by day. The
high cost of repair warrants an insurance cover for such machinery. The fire policy specifically
excludes the break down risks.

COVER

The policy covers unforeseen and sudden physical loss / damage to the machinery whilst:

a) In operation

b) or at rest

c) During Overhauling / Maintenance

d) being dismantled for the purpose of re-erection within the same premises.

The policy offers cover against all kinds of accidental, Electrical and Mechanical Breakdowns
due to internal and external causes.

Internal causes

Damage due to faulty material, defects in casting, faulty construction, overheating of parts, short
circuiting (electrical fires within the electrical equipments), faulty erection, disruption in case of
rotating bodies due to centrifugal forces, failure of operation of safety devices, etc.

External causes

Damage due to lack of skill, carelessness, falling bodies, electrical over-pressure, failure of
other connected machinery, entry of foreign object etc.

37
4.3 Marine insurance policy
Introduction
Marine insurance is the insurance of ships and goods in transit

Type of Marine Insurance

Marine Cargo & Marine Hull

SUBJECT MATTER OF INSURANCE

• Insurance of goods in transit By Rail, Road, air or By sea

• Insurance of ships/boats whilst in dock, in sea, during repairs

• Insurance of freight Charges

• Insurance of the duty on goods

WHO HAS INSURABLE INTEREST

• The Seller of the Goods

• The Buyer of the Goods

• The Transporter of the Goods

• The Financer of the Goods

FIXATION OF THE SUM INSURED

Maximum C.I.F. + 10%

• C= COST

• I= INSURANCE

• F= FREIGHT

• 10% = For other expenses

• Like handling etc.

38
CONTRACTS OF THE SALES

Analysis of a proposal starts with sale contract.

Eg. Terms of sales, price to be paid, who is responsible for insurance

FCA- FREE ON CARRIER

FAS- FREE ALONGSIDE SIDE

FOB- FREE ON BOARD- Seller risk up to loading on ship-from where the buyer’s risk starts

FOR- FREE ON RAIL/ ROAD

C%F- COST AND FREIGHT- Buyer takes insurance pays

CIF- Cost Insurance % freight ( seller takes the insurance)

39
EX works- seller’s minimum obligations. Not responsible for loading. All expenses borne by buyer
including insurance

SPECIAL FEATURES OF MARINE POLICY

• Assign ability

• Agreed value policy

• Modified indemnity

• Time policies

4.4 MARINE CARGO INSURANCE

• International in character- policy clauses, Inco terms

• Premium paid in local currency- claims in foreign currency

• Claims paid beyond SI(property+ expenses)

• Insurable interest at the time of loss

• No arbitration

• Recovery from carrier

MARINE CARGO CLAUSES

Clauses specify the risk covered

Three types of clauses

1. Clauses-C The restricted cover

2. Clause-B The basic cover

3. Clause-A The all risk cover

The insurance has two basic features:-

1. The insurance of goods during inland transit use-ITC clause A,B or C

40
 2. Insurance of goods export from/ import to India i.e. Import or Export Use ICC clause A,B or
C

INLAND TRANSIT CLAUSE- A

• RISK COVERED:

This insurance covers all risks of loss or damage to the subject matter insured damage the
general exclusions, war exclusion & strike exclusion

Duration from the time the goods leave the seller warehouse – Transit- until the expiry of 7
days after arrival at final railway or destination town or buyer warehouse.

INLAND TRANSIT CLAUSE- B

• Physical loss/ damage to insured goods caused by-

 Fire

 Lighting

 Breakage of bridges

 Collision with or by the carrying vehicle

 Overturning of carrying vehicle

 Derailment/ accident of the like nature to the carrying railway wagon/ vehicle

Exclusion: Identical to inland transit ( rail/road) Clause ‘A’+ mediclaim damage.

INLAND TRANSIT CLAUSE - C

• RISK COVERED:

Physical loss/ damage to goods caused by- Fire Lightning

• Exclusion: general exclusion

WAR

41
 Strike Exclusion

MARINE CLAIMS

MARINE CARGO CLAIMS

• TOTAL LOSS- Entire shipment is Lost due to the insured peril

• PARTIAL LOSS- Cargo is damaged partially damaged or the loss of the entire package

• EXPENSES- Which are incurred to prevent aggravation of loss

The type of losses and the extent depends on cover taken

Documents for ICC – Claims

• For particular average

Policy Document

Bill Of lading

Invoice

Survey Report

Debit note or the claim bill copy of protest & subrogation

• Ship Survey report

• L.O.B Certificate

• Short landing certificate

• Bill of entry

• Bill of repairs/ replacement

• A/C of Sale proceeds

• Correspondence

CLAIM PROCEDURE
• Immediate Notice of the Claim

42
 • Survey Before Taking Delivery

• For shortage- Certificate of shortage, landed But Missing

• For Damaged- certificate

• Non-delivery- Certificate

• Monetary Claim on Carrier.

4.5 MISCELLANEOUS INSURANCE

4.5.1 Group Mediclaim Insurance

4.5.2 Group Personal Accident

4.5.3 WC Policy

4.5.4 Money Policy

4.5.5 Fidelity Guarantee policy

4.5.1 GROUP MEDICLAIM INSURANCE

Hospitalization Expenses – These include room charges and operation theatre charges,
nursing expenses, fees of medical practitioner, anaesthetist and consultants.

Medicine, Consumables and Diagnostic Expenses – Cost of anaesthesia, blood, oxygen,

surgical appliances, medicine and drugs, diagnostic material and X-rays, dialysis,
chemotherapy, radiotherapy, pacemaker, artificial limbs and organs.

Domiciliary Hospitalization – The policy covers treatment for illnesses at home, subject to:
-Adverse medical condition restricting the patient from being shifted to a hospital

43
-Lack of accommodation in any hospital/nursing home.

Day Care Treatment – The policy will cover expenses incurred towards technologically
advanced treatment that does not require hospitalisation for 24 hours or more.

Domiciliary Hospitalization – We also provide cover for treatment administered at home,

subject to specified conditions.

Pre and Post-Hospitalization –Mediclaim Insurance Policy covers medical expenses for a
specified number of days.

Following Extensions would be required to be taken under Mediclaim Policy for better
coverage:

• Floater Cover

• Pre-Existing Diseases Coverage

• Time Limit Waivers ( 30 Days & First Year Exclusions Waivers)

• Maternity Benefit Extension

4.5.2 GROUP PERSONAL ACCIDENT

COVERS:

• Covers Accidents arising out of visible, external and violent means.

• Covers Death and Disability.

44
 • Death should arise out of an accident caused by an external, visible and violent
means.

• A person is said to have been disabled when he is prevented from engaging in any
occupation or business following an accident. Disablement may or may not result in
loss of earning capacity

DISABLEMENT

FOLLOWING THREE TYPES OF DISABLEMENT IS COVERED UNDER THE POLICY

1. PERMANENT TOTAL DISABLEMENT (PTD)

2. PERMANENT PARTIAL DISABLEMENT (PPD)

3. TEMPORARY TOTAL DISABLEMENT (TTD)

PERMANENT TOTAL DISABLEMENT

Occurs when disablement is

• Permanent and Irrevocable

• Injured Person is prevented from engaging in gainful employment of any kind

• Loss of Limbs (feet or hands), Eyes or any vital part of the body, by physical
separation, are examples of PTD

• Involves disablement of permanent and irrevocable nature but the disablement is only
partial in nature. Examples of the above would be loss of Toe or a finger etc.

TEMPORARY TOTAL DISABLEMENT

• Total Disablement of the person for a Temporary Period which may last for a certain
number of Days or Weeks.

• An example can be a fracture following an Accident.

SUM INSURANCE
45
Linked to the income of the Employee. Maximum Sum Insurance that can be taken is 48 - 72
Times the monthly emoluments earned. Lesser Sum Insurance can also be taken.

ASSIGNMENT

• Insured has to exercise his right to assign Policy monies at the time of taking Policy.

• Assignment is to nominate the person to receive the Policy monies in the event of
Death of the Insured.

CLAIMS:

• Duly completed Claim Form

• Copy of FIR if accident reported to Police

• Medical Reports for Disablement Claims, supported by medical expenses bills

• Death Certificate and Post Mortem Report for Death Claim

• Legal Heir Certificate if no assignment has been made

• Any other Document Insurers may deem fit depending on Merits of the Case.

SALIENT FEATURES OF GPA POLICIES OF VARDHMAN

• TTD Benefit is 0.5 % of CSI subject to max Rs.10,000/- per Week

• TTD Benefit is subject to 14 Days Excess

4.5.3 WORKMEN’S COMPENSATION (W.C.)

This policy is intended to cover the employers against the legal liability to all employees
under the

(a) Workmen’s Compensation Act 1923 and all subsequent amendment to said Act prior to
the issuance of Policy

(b) Fatal Accidents Act 1855 and

46
 (c) Common Law for death or bodily injury, sickness, illness or disease arising out of and
during the course of employment. The policy would cover all types of workmen, whether
permanent or temporary or under contract. The liability towards the Workmen’s
Compensation is statutory as per the Workmen’s Compensation Act 1923.

RECENT CHANGES IN WC ACT

Vide Amendment No. 65 – F / 2009 in WC Act, 1923, following major changes have been
effected by Central Govt notification dated January 18,2010

Scope of Act has been amended to include all employees, as against only Workmen in the
Act.

This means that all employees will be entitled for compensation in case of Death/Injury
suffered arising and in course of employment

Compensation due to Death/Injury under the Act will not be restricted on the basis of Rs.
4000/- per month as the wage/salary drawn by the employee (workman).

This mean that “Claim would be settled on the basis of Actual salary drawn by the
employee”.

No Medical Expenses limit applicable in treatment for Injury suffered arising and in course of
employment

This means that the earlier cap of Rs.2000/- is gone.

In view of the existing Policy Wordings which reads as “subsequent amendment to the said
Act prior to the date of issue of the policy ”,the changes should automatically be held covered
under the WC Policy of Vardhman issued wef 01.04.2010.However,they have yet to revert to
our queries raised to them in this regard.

Presumably, Insurers are still examining the impact of these major changes in coverage and
PSUs and many others have yet to firm up their responses.

Some Private Sector Insurers have firmed up their responses (IFFCO Tokio) but they are
reluctant to inform.

47
4.5.4 MONEY INSURANCE

This Money insurance policy covers:

• Loss of money in transit caused by robbery, theft, or any fortuitous event.

• Loss of money from the insured’s premises during business hours caused by theft or
robbery

• Loss of money from the insured’s safe or strong room caused by theft or robbery.

The term money includes cash, bank drafts, currency notes, treasury notes, postal orders,
money orders and postage stamps. The loss of money in transit must occur whilst being
carried by the insured or his authorized employee, that is, the employees named in the
schedule.

SOME OF THE ILLUSTRATIVE EXTENSIONS UNDER THE MONEY POLICY OF

VARDHMAN

• Riot & Strike

• Retention of Cash in excess of 48 Hours by additional 72 Hours

• No condition of motorized Carryings

• Cash can be carried on foot as well as motorized transport

• Terrorism Risk extension

• Unnamed basis

• Not mandatory that the cash will be carried with any security guard

• Transit of cash in any bag or briefcase

• Transit any time day or night on 24X7X365 days basis

• Coverage under Section I (a), (b) & (c)

• Money Carried by Vendors of Vardhman under Contract

• Deductible Nil

Note: Some Insurers have imposed restrictions of Armed Guards company for carryings
beyond certain limit

48
4.5.5 FIDELITY GUARANTEE INSURANCE

This Policy indemnifies the employer for monetary loss due to fraud or dishonest acts of the salaried
employees in connection with his occupation and duties. It thus covers the interest of the Employer in
the money or property lost due to infidelity of the employees.

• Acts
committed during the Policy Period is covered.

• The Geographical Scope of the Policy is worldwide.

In case the employee ceases to be in the service of the employer, discovery of the loss must
be made within six months of death, dismissal or retirement of the employee.

5. RESEARCH METHODOLOGY

5.1Research Method
The first and the foremost task given was to research on the insurance. As how many types of
insurances are there and how many of them does Vardhman covers.

The last years files and the data was provided along with the current year’s data and I had to
analyse and compare as what are the similarities and what changes are there which has been
made this year’s insurance plan as in the gun insurance last year’s insurance company i.e.
2009-10 was The Oriental Insurance and this year they shifted to The New India Assurance.
49
Analyze was done on the basis of sum- insured and the premium paid among this year’s
figures and last year’s figure’s.

5.2 Data Collection Methodology

Secondary Data
The data used in the research was the secondary data. As last year’s and current year’s files
were provided through which all the research part was done. An extensive research over the
internet helped in obtaining appreciatively relevant information on the market for Vardhman
group of companies and for the market scenario of finance and the insurance.

5.3 Study type

The study begins with secondary data of the companies records in the exploratory phase,
followed by the company’s profile, insurance types, in depth knowledge about the insurance,
the procedures, the claims procedures and cover note.

6. ANALYSIS

COMPARISION OF INSURANCE POLICIES F/Y 2009-10 & 2010-11

PARTICULARS F/Y 2009-10 F/Y 2010-11 EXCESS/SHORT

GODOWN UNIT-I 3645.00 4370.00 725.00

GODOWN UNIT-II 1020.00 1020.00 0.00

SALE DEPOT GODOWN 400.00 425.00 25.00

JINDAL YARN HOUSE GODOWN 20.00 25.00 5.00

50
MEHTA BANDHU GODOWN 8.00 10.00 2.00

BRANCHES GODOWN 200.00 150.00 -50.00

MSML ST-II 1300.00 1500.00 200.00

VTL FOCAL POINT 3300.00 3300.00 0.00

TOTAL 9893.00 10800.00 907.00

TRANSIT INSURANCE 40000 36000 4000

s.no Insuranse Name 2008-09 2009-10

in lakh. in lakh
sum sum Differe
insured insured nce
1 Cash-In-Transit Policy 2834.25 1624.5 -1209.75
51
 2 Group Personal Accident
for Staff- 1368 16663 15295

for workers 7651 59612 51961

3 for policy of Godown Stock (branches)

for kolkata,tripura,delhi
for MSML-2
for Vardhman textile ltd. (ST-II)
2960 8028 5068

Fire Policy of Godown Stock(VSGM Unit-

4 I-II 12712 13430 718

Composite Transit Fixed Asset

5 Declaration Policy 0 10000 10000

27525.2 109357. 81832.

TOTAL 5 5 25

s.no Insuranse Name 2008-09 2009-10

premium premium Differe

paid paid nce
52
 1 Cash-In-Transit Policy 3185 5162 1977

2 Group Personal Accident

for Staff- 3074 202960 199886

for workers 17193 460265 443072

3 for policy of Godown Stock (branches)

for kolkata,tripura,delhi
for MSML-2
for Vardhman textile ltd. (ST-II)
-
135923.
384479 248555.98 02

Fire Policy of Godown Stock(VSGM Unit-

4 I-II 389363 248568 -140795

Composite Transit Fixed Asset

5 Declaration Policy 0 33090 33090

1198600 401306
TOTAL #REF! .98 .98

7. CONCLUSION AND RECCOMENDATION

The sum insured has increased in many of the insurance policies. For the group personal
accident policy, for staff, the sum insured has seen an increase from 1368 to 16663 and, for
workers, from 7651 to 59612.

The company has preferred the New India Assurance Co. Ltd. for its insurance from many
years now and the rate of premium on certain categories likes cash in transit and stock in
transit has seen increase and all other assets policy, inside godown policies & GPA policies
have all seen a decrease over the past few years.

I would recommend that the company should consult and enquire with other companies for
lower rate of premium and reduce the unnecessary expenses within the organization. And
53
also, the sum insured on different policies as per the need to the company may also be
increased.

And a proper check should be kept on the cash in transit and stock in transit because all such
small expenses can result in big loss one day.

54